Group purchasing cuts costs, optimizes supply chain

A report from the Healthcare Supply Chain Association (HSCA) said the group purchasing organizations (GPOs) it represents help cut supply chain costs by an average of 15 percent and reduce drug spending by 25 percent.

The results, based on a survey of GPOs in the association, led researchers to estimate group purchasing will save the healthcare industry as much as $864 billion between 2013 and 2022.

“Although cost-savings and delivering the best products at the best value remain central to the GPO core mission, hospitals are increasingly relying on GPOs for a broad range of services beyond cost-savings,” HSCA President and CEO Todd Ebert wrote in his introduction to the report. “GPOs are expanding their offerings to meet evolving hospital and provider needs, including data analysis and benchmarking, market research, innovative technology integration, infection control, electronic product tracing, and developing and facilitating communities of knowledge among healthcare providers and supply chain experts to share best practices.”

The report offered several examples of GPOs providing significant cost savings to providers:

• $10 million was saved at an expanding health system when “a GPO offered innovative business intelligence tools alongside supply chain professional education.”
• $37 million in pharmaceutical costs were saved at one hospitals thanks to negotiating prices on eight drugs.
• $1 million was saved when 21 hospitals joined in a GPO to buy office supplies.

A common theme of the report was emphasizing what GPOs could do outside of getting volume-based discounts for drugs and medical supplies. Those areas still see significant savings, with one HSCA member reporting savings of up to 88 percent on supplies, and another saving $350,000 per year just on gloves. But the report said even greater savings can be achieved on more expensive equipment using a GPO’s “bird’s-eye view” on whether a new technology will bring some value.

“If a GPO sees an innovative product being used by a particular healthcare entity, presented at a regional conference, or by inviting technology companies to present to group purchasing committees that include hospital employees and clinicians, that GPO can immediately offer that product to its customers across the entire country,” the report said.

In those cases, suppliers may benefit, too, as GPOs may know about technological advancements from smaller, newer companies. Their existing connections will help those new suppliers build relations with customers and understand their needs.

“By creating a collaborative environment that encourages education and customer access to data and growth opportunities, GPOs bring great benefits to their supplier partners in the business transaction,” HSCA wrote.